Canada regulator's plan for review of Energy East pipeline under fire

CALGARY, Alberta (Reuters) - A Canadian regulator’s plan to assess indirect carbon emissions when considering TransCanada Corp’s (TRP.TO) Energy East pipeline application sets a harsh precedent for future projects, the Alberta government and supporters of the pipeline said on Friday.

TransCanada said on Thursday it may abandon the proposed 1.1 million barrel per day pipeline - from Alberta to New Brunswick - following a decision by the National Energy Board in August to look at upstream and downstream carbon emissions when deciding whether the project is in the public interest.

Supporters of Energy East said the NEB’s plan to consider indirect emissions, or emissions that come from the production and refining of the crude the pipeline will carry, was unreasonable.

“We believe it would be a historic overreach and has potential to impact the future of energy development across Canada,” Alberta Energy Minister Marg McCuaig-Boyd said in a statement. “This is not an appropriate issue to include in the review.”

Calgary-based TransCanada asked the regulator to pause the application for 30 days while it gauges the impact on the pipeline’s cost, schedule and viability. That request was granted on Friday.

It is the latest blow to a project that Canada’s oil industry says is needed to bring oil sands crude to overseas markets and avoid deep discounts on Canadian barrels that eat into revenue for producers already struggling with low prices.

McCuaig-Boyd compared deciding the merits of a pipeline based on downstream emission to judging transmission lines based on how the electricity will be used.

The Canadian government released transitional rules for energy reviews in January 2016 that said upstream emissions from crude producers should be assessed, but the NEB’s plan goes further by including the downstream greenhouse gas impact.

“This sets a dangerous precedent for other projects as the things that could qualify as greenhouse gas emissions would start to just burgeon,” said Rafi Tahmazian, an energy portfolio manager at Canoe Financial in Calgary. “It’s almost impossible to calculate.”

The NEB has not released any clarification on the process it would use to consider the measurement of upstream and downstream emissions, spokeswoman Sarah Kiley said.

While the NEB panel assessing Energy East is an independent body, Chris Bloomer, president of the Canadian Energy Pipeline Association, urged the federal government to step in and clarify what the indirect emissions requirement means.

“If it remains unclear and uncertain there’s an unfortunate potential consequence that we lose another pipeline project,” Bloomer said.

New Brunswick’s premier, Brian Gallant, said in a statement that he spoke to TransCanada Chief Executive Russ Girling on Thursday evening and the company is considering other options, making it possible Energy East will not be built.

Natural Resources Canada, the federal ministry, sees TransCanada’s request to pause the application as ultimately a private sector decision, said spokesman Alexandre Deslongchamps, adding that the independent NEB panel is reviewing the request.

TransCanada declined to comment beyond its statement on Thursday.

Additional reporting by David Ljunggren in Ottawa; Editing by Leslie Adler and Matthew Lewis